Towards the end of the 1990s the linear side of the human mind took over, propelling stock markets to insane heights and laying the important early ground work for the heavy debt loads modern financial economies currently bear.

During the 1990s, modern portfolio theory, also assumed a dominant position, leading to a belief in efficient markets and in the early years of its application, a belief that past risks and returns could be extrapolated forward.

While MPT has had to cope with more proof that mankind is not indeed rationale, that markets and economies are not always in a general equilibrium, this linear approach to portfolio constructon, planning and management remains dominant in academic and financial circles.

This blog seeks to provide contrary opinion to concensus thought, in particular, to challenge the structures of modern portfolio theory and their application in a non linear out of equilibrium universe.

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  1. Great blog; Larry Elford referred it to my attention. I’m part of a group that’s extremely frustrated with the handling of the First Leaside Group of Companies (if you’re aware of the situation, all I can say is the press has only covered the OSC’s position and is leaving out a huge part of the story).
    FL was a small securities dealer with some $350 million under management (1,200 investors, over 60 employees so ‘no small shop’) through a series of limited partnerships investing in both US and Canadian real estate. It had delivered the promised returns for nearly 20 years, but had run into debt-equity problems in part because of the US real estate mess. However, it was able to raise money and manage the situation via inter-company financing, etc. The OSC had ordered a viability audit which came back with concerns but also a series of ‘levers’ that could be pulled to correct the issues without interrupting distributions!!!. Instead, the OSC charged the two principals with non-criminal ‘fraud’ and essentially condemned the company. If all this was avoidable, and it wasn’t criminal fraud, why did the investors and employees come last in the OSC’s considerations? The whole thing was completely avoidable, and the CROs fees and legal fees have been ruinous with nothing to show…you couldn’t wish for a more textbook case of ‘system abuse’ against investors. The OSCs case against the principals will be heard in February, and despite a scandalous list of stories in the press (all carefully qualified with the carefully phrased “the allegations have yet to be proven”) investors and employees (such as myself) are starting to wake up and demand that someone look into this case and answer the big question: if the viability audit made clear that solutions were available, why weren’t they considered? Because the regulator wants headlines, not solutions. It wants to inflict pain, not heal investors when a situation needs correcting. The entire OSC needs to be opened up and re-assessed because right now it’s a miserable failure, not sure whether to apply a ‘light tough’ or a ‘heavy hand’. All investors and financial professionals want is an ‘even hand’.

    Look more closely at First Leaside…there was no talk of redemption; they wanted it strangled. Why?

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